Question 1

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Accepted Answer

A) True 
 B)False

Question 2

A drilling company purchased a mining site for $450,000 on July 1,2015.The company expects to mine ore for the next 10 years and anticipates that a total of 80,000 tons will be recovered.During 2015,the company extracted 5,800 tons of ore.The depletion expense for the year 2015 is:

Accepted Answer

A)  $45,000.
B)  $50,800.
C)  $5,860.
D)  $32,625.

Question 3

A current asset account must be increased for revenue expenditures since they benefit only the current period.

Accepted Answer

A) True 
 B)False

Question 4

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 5

If a capital expenditure is treated as a revenue expenditure,then:

Accepted Answer

A)  expenses are overstated and owners' equity is understated.
B)  expenses are understated and assets are overstated.
C)  expenses are understated and owners' equity is overstated.
D)  net income is overstated and owners' equity is understated.

Question 6

Which of the following is a fixed asset?

Accepted Answer

A)  Cash
B)  Equipment
C)  Land held for investment
D)  Notes receivable

Question 7

Fixed assets are ordinarily presented in the balance sheet:

Accepted Answer

A)  at its current market value.
B)  at its replacement cost.
C)  at its cost less accumulated depreciation.
D)  under intangible assets.

Question 8

Which of the following is a characteristic of accumulated depreciation account?

Accepted Answer

A)  Accumulated depreciation represents cash reserved for asset replacement.
B)  Accumulated depreciation account is a contra-liability account.
C)  Accumulated depreciation may be disclosed in the notes to the income statement.
D)  Accumulated depreciation is reported on the balance sheet as a deduction from the cost of the asset.

Question 9

Which of the following should be included in the acquisition cost of a piece of equipment?

Accepted Answer

A)  Uninsured theft
B)  Mistakes in installation
C)  Vandalism
D)  Installation costs

Question 10

Intangible assets do not exist physically.

Accepted Answer

A) True 
 B)False

Question 11

A gain is recorded on the sale of fixed assets when:

Accepted Answer

A)  the asset is sold for a price less than its book value.
B)  the asset is sold for a price more than its book value.
C)  accumulated depreciation on asset is less than its selling price.
D)  accumulated depreciation on asset is more than its selling price.

Question 12

Which of the following is true of fixed asset turnover?

Accepted Answer

A)  It measures the efficiency with which a company uses its fixed assets to generate sales.
B)  It measures the proportion of fixed assets to total assets.
C)  It uses net purchases as a denominator in its calculation.
D)  It measures the profits generated by the fixed and current assets of the company.

Question 13

Companies usually compute depletion by using the double-declining-balance method.

Accepted Answer

A) True 
 B)False

Question 14

Which type of depreciation occurs when an asset can no longer provide services for which it was intended?

Accepted Answer

A)  Physical depreciation
B)  Market depreciation
C)  Cost depreciation
D)  Functional depreciation

Question 15

Which of the following is a characteristic of fixed assets?

Accepted Answer

A)  Fixed assets are offered for sale as part of normal operations.
B)  Fixed assets do not exist physically.
C)  Fixed assets are long-term or relatively permanent assets.
D)  Fixed assets that are no longer used in operations are still classified as fixed assets.

Question 16

Machine with a useful life of 5 years and a residual value of $6,000 was purchased on January 3,2015,for $48,500.The machine was sold on January 5,2020,for $13,000.

Accepted Answer

(a) $6,000 = ($48,500 - $42,500) Assets ...

Question 17

The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

Accepted Answer

A) True 
 B)False

Question 18

Book value is computed as:

Accepted Answer

A)  current market value less residual value.
B)  cost less residual value.
C)  current market value less accumulated depreciation.
D)  cost less accumulated depreciation.

Question 19

Recording depreciation:

Accepted Answer

A)  decreases net income and cash flows.
B)  decreases net income but has no effect on cash flows.
C)  decreases net income,fixed assets,and cash flows.
D)  decreases net income but has no effect on fixed assets and cash flows.

Question 20

Paleota Company purchased a patent from Finise for $234,000.At the time of purchase,the patent had a remaining useful life of 10 years.Determine the patent amortization expense for the first year.

Accepted Answer

A)  $23,400
B)  $23,000
C)  $14,000
D)  $9,800

Exam 7: Fixed Assets and Intangible Assets

Which of the following is a fixed asset?

Correct AnswerverifiedShow Answer

Which of the following is true of fixed asset turnover?

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A drilling company purchased a mining site for $450,000 on July 1,2015.The company expects to mine ore for the next 10 years and anticipates that a total of 80,000 tons will be recovered.During 2015,the company extracted 5,800 tons of ore.The depletion expense for the year 2015 is:

Correct AnswerverifiedShow Answer

Long-lived assets that are intangible in nature,used in the operations of the business,and not held for sale in the ordinary course of business are called fixed assets.

Correct AnswerverifiedShow Answer

Paleota Company purchased a patent from Finise for $234,000.At the time of purchase,the patent had a remaining useful life of 10 years.Determine the patent amortization expense for the first year.

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Which of the following should be included in the acquisition cost of a piece of equipment?

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Recording depreciation:

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Intangible assets do not exist physically.

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If a capital expenditure is treated as a revenue expenditure,then:

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Which of the following is a characteristic of fixed assets?

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The estimated amount that an asset can be sold for at the end of its useful life is called its book value.

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Fixed assets are ordinarily presented in the balance sheet:

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Book value is computed as:

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Machine with a useful life of 5 years and a residual value of $6,000 was purchased on January 3,2015,for $48,500.The machine was sold on January 5,2020,for $13,000.

Correct Answerverified(a) $6,000 = ($48,500 - $42,500) Assets ...View AnswerShow Answer

Which of the following is a characteristic of accumulated depreciation account?

Correct AnswerverifiedShow Answer

The balance in Accumulated Depreciation account is deducted from the cost of fixed assets on the balance sheet.

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A gain is recorded on the sale of fixed assets when:

Correct AnswerverifiedShow Answer

Companies usually compute depletion by using the double-declining-balance method.

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A current asset account must be increased for revenue expenditures since they benefit only the current period.

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Which type of depreciation occurs when an asset can no longer provide services for which it was intended?

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(a) $6,000 = ($48,500 - $42,500) Assets ...
View Answer

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